President Jacob Zuma used Nkandla as security for an R8.5-million loan from the Venda Building Society Mutual Bank, which he used to pay back the money for upgrades at his KwaZulu-Natal homestead.
But the security guarantee was only provided nine months after the loan had actually been granted.
Before that "sham" transaction, it is suggested by a Venda princess, the president traded on his patronage of a disputed claimant to the Venda throne to secure the funds.Zuma's mortgage agreement with the bank is among court papers filed with the Supreme Court of Appeal by Masindi Mphephu, who is the daughter of late Venda King Tshimangadzo Mphephu.
In her ongoing battle against her uncle, Toni Mphephu-Ramabulana, for the throne of the Vhavhenda kingdom, Mphephu has asked the court to be allowed to introduce new evidence in her appeal against a 2015 judgment in the High Court in Thohoyandou.
While she has lost several rounds in her legal battle, in September 2016 she got the court to halt Zuma's plans to crown her uncle, pending the outcome of the litigation.
In her latest application, she highlights that Mphephu-Ramabulana is a shareholder in Dyambeu Investments, a company that, together with the Public Investment Corporation, is the majority shareholder in VBS bank.Zuma tried to hold Mphephu-Ramabulana's coronation just three days after the loan was granted, she says.
Court papers show that the mortgage was only registered against the property several months after the loan was granted and Zuma repaid the funds to the National Treasury.
"What is also unusual ... is that the bank was willing to lend a very substantial sum to President Zuma approximately nine months before its security in the form of the registered bond was in place. I question on the basis of the anomalies listed above, whether the entire after-the-fact arrangement for security for the loan is not a series of simulated transactions or a sham."
VBS and Mphephu-Ramabulana have repeatedly denied that Dyambeu was involved in influencing the bank's decision to grant the loan. The bond note states that if Zuma defaults on the home loan, VBS can within 20 days order him to vacate the premises.
Zuma is also prohibited from removing any "improvements and/or fixtures and fittings erected on the property" in the event that he is evicted.
Zuma does not own the land on which Nkandla is built. He has a 40-year lease with the Ingonyama Trust, which was signed in 2011. According to mortgage agreement documents filed in court, Zuma leases 8.7ha of the Nxamalala farm for R8,000 a year, at an escalation percentage of 10%. The lease expires in 2051.
A lawyer who deals with property in respect of land owned by traditional authorities said any lease longer than 10 years was regarded as "real right in land" and therefore could be used as security. "One doesn't usually see this often though for residential property," said the lawyer, who did not want to be named.
He said the loan agreement seemed to be "standard", but added: "Of interest is that the lease and bond refer to an extent of some 8ha, whereas the certificate of title refers to an extent of over 4,000ha. The endorsements on the land are the bond and the lease. This is relevant because if Zuma defaults, the bank would effectively execute over the entire property - not only the 8ha but the 4,000-odd."
VBS spokesman Ndivhuwo Khangale on Friday declined to respond to questions, citing client confidentiality.
During discussions earlier in the week he denied any wrongdoing by the bank.
Presidency spokesman Bongani Ngqulunga said on Friday: "The president's VBS Mutual Bank loan application was a normal application and the president was subjected to what he understood was normal lending criteria. He has maintained his account with the bank on the required basis."
He confirmed that the Presidency had on July 15 2016 confirmed Zuma's attendance to officiate at the coronation of "His Majesty King Mphephu" after a recommendation by the Department of Traditional Affairs.
The Ingonyama Trust declined to comment on Zuma's loan agreement, saying it had not been involved.
IN NUMBERS
• 40 years is the length of the lease with Ingonyama Trust
• 2051 is the year the lease expires
• R8.5 million is the amount of Zuma’s loan from VBS
• R8,000 is the amount Zuma pays annually to the Ingonyama Trust tolease the Nkandla land..